Visit http://indiaer.blogspot.com/ for complete details �� ��
Punjab National Bank (PNB) reported net profit growth of 15.9% yoy to `1,075cr
for 2QFY2011, slightly above our estimate of `1,007cr on account of
higher-than-expected NIMs and lower provisioning on the NPA front. At
current levels, the stock is trading at ~9% above the upper-end of its historical
range and in our view, does not offer sufficient margin of safety from the negative
surprises that could arise on the asset quality front in the near term. Hence, we
remain Neutral on the stock.
Strong core performance but pressure on asset quality persists: During
2QFY2011, advances grew 27.6% yoy (6.0% qoq) driven by the 45.9%, 32.7%
and 29.0% yoy growth in the MSME, retail and agriculture segments, respectively.
Deposits grew 18.4% yoy (7.1% qoq). The growth in both advances and deposits
was well above the industry growth rate. CASA deposits grew at a healthy 24.9%
yoy, driven by a 24.3% yoy growth in current account deposits and 25.1% yoy
growth in saving account deposits. The CASA ratio declined to 40.6% from 40.9%
in 1QFY2011. On the back of the 27bp increase in the yield on advances,
reported NIM improved by 12bp qoq to 4.06%. Consequently, NII grew by a
healthy 42.1% yoy and 13.7% qoq to `2,977cr. Gross NPAs increased, in
absolute terms, by 11.4% qoq to `4,025cr and net NPAs rose by 11.1% qoq to
`1,426cr. Gross slippages for the quarter stood at `911cr (`1,216cr in
1QFY2011), indicating an annualised slippage ratio of 2.0% (2.6% in
1QFY2011).
Outlook and Valuation: While we believe that the bank can deliver healthy core
RoEs of 18-20% due to its strong legacy, actual RoEs are unsustainably high at
26.6%. On the valuation front, the stock is trading at 1.74x FY2012E ABV of
`741, which is expensive considering its 5-year range of 1.0-1.6x and median of
1.4x. Hence, we maintain our Neutral view on the stock.
No comments:
Post a Comment